Keynes as Public Works Skeptic

Paul Krugman raises a very good point: “Is it too much to ask that someone criticizing Keynes actually, you know, read Keynes…?”However, I suggest that the point also be applied to those who use Keynes to support their own ideas today. This latter group may be in for some surprises.

Consider, for example, the idea of public works, like infrastructure spending, as a stimulus to the private economy. The non-partisan Congressional Budget Office has estimated that most of this spending will take quite a long time to have an impact. According to an Associated Press report:

“Overall, only $26 billion out of $274 billion in infrastructure spending would be delivered into the economy by the Sept. 30 end of the budget year, just 7 percent. Just one in seven dollars of a huge $18.5 billion investment in energy efficiency and renewable energy programs would be spent within a year and a half.”

Now listen to Keynes in 1942:

“Organized public works, at home and abroad, may be the right cure for a chronic tendency to a deficiency of effective demand. But they are not capable of sufficiently rapid organisation (and above all cannot be reversed or undone at a later date), to be the most serviceable instrument for the prevention of the trade cycle.”

(Keynes, Collected Writings, vol. XXVII, p.122 ).

People need to pay more attention to Keynes’s mature policy ideas of the late 1930s and 1940s and less to his simple advice of the early ‘30s.

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48 thoughts on “Keynes as Public Works Skeptic”

The pro-infrastructure crowd is also treating all infrastructure spending as: (1) homogeneous, (2) exempt from political influences, rent-seeking, corruption, etc., and (3) exempt from the law of diminishing marginal utility.

It is true, for example, that “tax cuts won’t build schools.”

It is therefore also true that tax cuts won’t build schools that are too big, or too close to an already existing school, or have an Olympic-sized pool “because it would be nice,” or a top-of-the-line football field “because the other school has one,” or…

And a second Hoover Dam right in front of the first one is hardly a worthwhile infrastructure project.

Simply chanting “Infrastructure!” as if it were a get-out-of-debate-free card is hardly Nobel or Ivy League thinking.

Robert Barro had an excellent op ed in the Wall Street Journal, Thursday, January, 22nd: “Government Spending is No Free Lunch” (A17). He has estimated the fiscal multiplier for a variety of eras, including WWII. The multiplier has historically been 0.8, i.e., “stimulus” lowers other components of GDP. The facts bear out what Keynes pointed out in 1942.

OK, public works were deemed by Keynes to be not “…the most serviceable instrument for the prevention of the trade cycle.”

Is this supposedly a criticism of their benefit in stimulating demand?

And @Kip… oh, soooo cute! Perhaps you’ll help out the folks at ReadTheStimulus.Org in boldfacing or otherwise identifying the “dam right in front of the first one” and other such intentions for Obama to throw money into a pit so he can nose out 43 as somebody who raised the deficit the most with the least to show for it.

Why should old theoretical work be cited as evidence of a productive policy in the first place? Shouldn’t empirics be the standard?

Don’t fall into Krugman’s trap. Citing some dead economist’s ideas is not evidence of the validity of your own. Keynesianism is a catch-all word now for a whole host of statist interventions. Let’s actually discuss empirically tested policy proposals.

The point is that people use Keynes as authority for their policy recommendations. There are two ways to counter this: (1) empirical evidence of likely effects (e.g., Congressional Budget Office report above) and (2) showing that Keynes himself was skeptical about some of these policy recommendations. Both are useful. I grant that the argument from authority is not ideal. However, it is alive and well, especially for the vast majority who have no time to do research. We all need to accept that reality and deal with it.

A lot of the debate (especially regarding Keynes, different schools of economic thought, etc.) just polarizes the issues and is counterproductive towards understand a very complex, open model of interdependent causality.

@ Pointer: While I agree empirics should be a standard, it should not be THE standard. Economics is above all a behavioral science involving an open system with infinite variables so empirics are not as accessible.

@ Kip: Yes, there are many flaws with the infrastructure approach and you bring up some important ones. However, prudent public infrastructure creation has tons of positive externalities.

I think the economy will really achieve optimal performance until there is an effort to eliminate economic friction and invest in competitive infrastructure, that is infrastructure that allows a sector to achieve an optimal social equilibrium based on IO theory and externality analysis. *meh* Just my opinion.

Rather than remain on the policy level of whether public spending works or not, a subject that has been hashed and rehashed on both the sides of the debate for so long, could we for a moment focus on execution?

Poorly executed public spending is as bad as poorly directed tax cuts as our repeated experience of the past has shown. Well directed projects in public domain contribute to growth, as do well directed tax cuts spur demand.

Unless America and its economists and politicians get off their hobby horse of pushing their favorite ideas and down to the task of making every bit work, I do not see the possibility of us coming out of our desperate time.

Let us not confuse what people say when they invoke Keynesian catechism with what they really intend. Infrastructure spending is a catchphrase for massive spending on politically popular programs that will continue to buy votes for its proponents.

Since many of these proponents must realize that such spending won’t stimulate the economy, they cloak it in Keynesian jargon to gain political support.

As we can see from this article Keynes was all over the board in policy, so you can probably read into what he says exactly what you want.

As I understand it, Keynes wrote that organized public works aren’t the, “most serviceable instrument” for preventing the trade cycle. A few points:

1) Does it necessarily follow that the infrastructure spending won’t impact the trade cycle?
2) From the same article on the CBO study, “Still, other elements of Obama’s $825 billion economic recovery plan, such as $275 billion worth of tax cuts to 95 percent of filers and a huge infusion of help for state governments, will be distributed into the economy more quickly.”
3) The originally proposed infrastructure portion of the stimulus package, according to TPM, was reduced to make room for the tax cuts (Krugman lamented this on a post a few days back).
4) Someone like John Thain could find a way to get infrastructure money out there.

A few of y’all should lighten up. I know your egos and careers are tied up in this economic thing, but in the long run we’re all dead, right? Be collegial, compadres.

Context is hugely important. There can be no doubt that Keynes continued throughout his life to believe that public works and other fiscal stimulus could be enormously important in overcoming, or preventing, recessions. This quote does not in any way support skepticism about public works. Indeed, Keynes explicitly says – “organised public works, at home and abroad, may be the right cure…”

Keynes was arguing in 1942 for a system of buffer stocks, or “Commodity Control”, in addition to such an approach. The sentences quoted are immediately followed by this:

“Buffer stick controls to deal with the epidemic of intermittent effective demand are therefore the perfect complement of development organisations (or international T.V.A.) to offset a deficiency of effective demand which seems to be endemic.”

Keynes wanted “international T.V.A.” – to do internationally what President Roosevelt had done with the Tennessee Valley Authority. So much for skepticism about public works!

The context of all this may be seen by reading Keynes’s Collected Writings, or the chapter of Markwell’s “Keynes and International Relations” dealing with Keynes’s vision for the post-war world. The latter makes it clear that it was Keynes being persuaded (e.g. by Alvin Hansen and Luther Gulick) that the United States was sufficiently committed to ideas like “international T.V.A.” that led him to think it safe to advocate an open trading order post-war.

No one reading in context what Keynes actually wrote could, with intellectual integriy, imagine that he was a skeptic about the value of public works to alleviate deficient demand.

Professors of economics who, implicitly or explicitly, quote out of context are liable to bring themselves into disrepute and contempt.

Please read Bradley Bateman’s book “Keynes’s Uncertain Revolution” before you accuse me of quoting out of context. Furthermore, thiis is just a blog post, not a journal article. It is meant as food for thought.

Keynes advocated the “socialization of inverstment”, that is, a long term policy of public investment that would provide stability, not start-stop stimulus. Keynes is making a distinction between discretionary fiscal policy (what today’s Keynesians are advocating) and permanent policy rules that will reduce the uncertainties associated with investment.

Public works spending is a specific type of stimulus spending. So my quotation from the CBO is only on the point of infrastructure spending.

Incidentally, Keynes did not think much of stimulating *consumption* spending through tax cuts — he did not think that people would change their consumption much in response to temporary changes in disposable income.

Those who are worried that I took Keynes out of context should keep in mind several things. First, my post was titled “Keynes as Public Works Skeptic.” This is a particular kind of stimulus spending, not the whole of stimulus spending. Second, Keynes was in the late 30s and 40s opposed to start-stop stimulus. He thought starting would come too late (to help a slump) and stopping would come too late (to avoid inflation among other things). Instead he advocated the “socialization of investment” that is, a stable program of continual investment by quasi-government entitities like public utilities. This stable program would reduce the uncertainties of investment expenditure and, with a few other changes like keeping interest rates permanently near zero, would prevent slumps from occuring and keep employment high. Third, people should read Bradley Bateman’s book Keynes’s Uncertain Revolution and or Allan Meltzer’s book Keynes’s Monetary Theory, esp. pp. 179 -189 for more detail.

There is no meaningful and relevant sense in the current situation in which Mario’s words “Keynes as Public Works Skeptic” are justified by the facts cited, namely

1. that Keynes favoured a long-term program of public works (since when did that become an argument against using them as part of a fiscal stimulus?!)

2. he favoured keeping interest rates low over the long term (ditto)

3. he identified problems in ramping up public works programs quickly, and bringing them to an end quickly.

Keynes himself said “Organized public works, at home and abroad, may be the right cure…”

As I have already pointed out, Mario’s quote from Keynes comes from where he is advocating complementing public works (“international T.V.A.”) with buffer stocks “to offset a deficiency of effective demand…” (See Markwell for more on “international T.V.A.” and the context.)

The fact that Keynes wanted a long-term program of public investment to prevent fluctuations did not mean that, if fluctuations came, he was against public works to try to get things right again!

There are many other passages in volume 27 of Keynes’s Collected Writings where he is engaged in war-time discussion about post-war full employment policy that are highly relevant, such as

(pages 319-20) – Keynes to James Meade, 25 April 1943

“Capital expenditure would, at least partially, if not wholly, pay for itself. …

Moreover, the very reason that capital expendutire is capable of paying for itself makes it much better budgetwise and does not involve the progressive increase of budgetary difficulties, which deficit budgeting for the sake of consumption may bring about or, at any rate, may be accused of bringing about. Besides which, it is better for all of us that periods of deficiency expenditure should be made the occasion of capital development until our economy is much more saturated with capital goods than it is at present.”

Or – also relevant to today – at page 323:

“The Long-term problem of full employment”, 25 May 1943

“Emphasis should be placed primarily on measures to maintain a steady level of employment and thus to prevent fluctuations. If a large fluctuation is allowed to occur, it will be difficult to find adequate offsetting measures of sufficiently quick action. This can only be done through flexible methods by means of trial and error on the basis of experience which has still to be gained. If the authorities know quite clearly what they are trying to do and are given suficient powers, reasonable success in the performance of the task should not be too difficult.”

Mario, quoting out of context as you did is not justified by this being “just a blog post, not a journal article”!

For those who don’t have access to the feast within Keynes’s Collected Writings, I recommend the works about him by Skidelsky, Moggridge and Markwell for getting an understanding of him. In context. Not misinterpreted through quotation out of context.

You mean your quotation from an AP report that didn’t actually quote a CBO report, because at that point there was no official CBO report to quote — only an unofficial analysis of a leak of a portion of a report?

Is it too much to ask that someone claiming to quote the CBO actually, you know, read an official CBO source?

“Please read Bradley Bateman’s book “Keynes’s Uncertain Revolution” before you accuse me of quoting out of context”.

The quote you use from Keynes doesn’t seem to be in Bateman’s book (at least according to Google Book search), and the book seems to be primarily about Keynes and his role in the philosophical debates about of probability theory, belief and confidence, as they apply to the economic issues of his time. Bateman’s title is awful handy, though, isn’t it? Doesn’t the very sound of it conveniently lend weight to the idea of Keynes developing ever greater doubts about his own thinking? It’s a whole out-of-context quote in itself, come to think of it.

Put me down with Laura, here. Keynes is rather obviously talking there about buffering garden-variety economic cycles that might be more easily addressed through other means, but he is still (in the very same quote) clearly supportive of public works for long-term deficiencies of demand.

What would Keynes like say in our present context? Almost certainly much the same. At this point, there seems little doubt that, even if the recession ends this year, we’ll be facing such persistent deficiencies. Employment has taken a long time to rebound after the past few recessions, so if a public works program doesn’t start generating jobs for this year, because of a long planning horizon, so what? We’ll probably need those jobs next year anyway, and the year after, to make up the gap, if past recessions are any guide.

One of the sneering implications of this blog post is that the administration either doesn’t understand the importance of timing, or isn’t seeing that emphasis reflected in proposed legislation. However, the understanding of Keynes’ logic on the importance of proper timing of stimulus spending seems, if anything, pervasive in the rhetoric coming from the Obama administration. “Shovel-ready”, “use it or lose it”, “jolt” — these are clearly calculated to impress upon the public (and, I fervently hope, the GOP and Blue Dog Dems in Congress) the desire of ramping up spending as fast as possible, but only to a temporary peak. That doesn’t preclude taking some longer-term measures as well.

And, speaking of long-term measures, the other sneering implication of this post is that Krugman is unaware of any issues around the timing of infrastructure projects. Actually, Krugman has (not just once, but repeatedly IIRC) addressed the issue of delays in infrastructure spending in creating jobs and demand, and his response has been consistent: he thinks we’re going to need the resulting jobs for a long time anyway. So how does this make Krugman some ignoramus when it comes to “what Keynes REALLY said”? What did Keynes really say? I’m not sure I’d rely on you for that. When challenged, you immediately pointed to two books that Keynes DIDN’T write, rather than to the work from which the quote was drawn.

Laura: “Context is hugely important.”

Not when you’re promoting memes in the blogosphere. Then, it’s just an impediment to propagation.

Rizzo: “. . . thiis is just a blog post, not a journal article. It is meant as food for thought.”

Obviously not. Keynes was no “public works skeptic”. He was skeptical that public works had a particular application, that’s all. You might have cleared this up in the blog post itself if you intended the post to be truly “food for thought.” Instead, you cover your caveats only in comments. Surely, by now, you know how the blogosphere works? How confirmation bias works? How out-of-context quotes can propagage when they feed confirmation bias?

This reminds me of people who dispute the “real meaning” of quotations from the Bible. Obviously the authority of Keynes means quite of lot to many people.

I repeat my bottom line: Keynes was skeptical with respect to the timing issues of public works spending just as numerous modern-day economists are. The CBO estimates were reported by the Associated Press. Even after reading the Huffington Report it seems that there estimates were still in fact made, just no formal report. [Hey, how can I trust the Huffington Report — is there a source that keeps tabs on them?] Yes, ithe estimates are only for a *portion* of the spending plan (continually undergoing change so that if you think it is X today it won’t be that tomorrow). This is clear from the AP story.

Keynes was a radical. He did not think start-stop public works were very effective. He wanted long run stability of investment by the permanent, not temporary, planning of massive investment by what he called quasi public bodies.

“One of the sneering implications of this blog post….” I observe that any sneering here is not being done by Mario. Also, for what it’s worth, long comments are not read by visitors and tend to discourage contributions by other people.

Sandy Ikeda beat me to the punch. As a non-economist and decidedly uncommitted (in terms of economic theory) reader of this blog, it is incredibly difficult to find the sneering and the flames and all of that to be coming from Mario Rizzo.

And, Michael Turner, I see no claim from Rizzo that Krugman is an ignoramus with regards to what Keynes really said. Krugman challenged Keynes’s critics to read some Keynes, and that’s what seems to be happening.

“so if a public works program doesn’t start generating jobs for this year, because of a long planning horizon, so what? We’ll probably need those jobs next year anyway,”

Well the “so what” is then it’s no longer an “emergency stimulus bill”, it may have its own merits, but if it’s long term then it’s for long term, not short term. And therefore if it’s a long term bill then it should be advertised as such, without people pressuring the vote and claiming it’s an “emerceny” and that the bill wil save us.

[…] “Organized public works, at home and abroad, may be the right cure for a chronic tendency to a deficiency of effective demand. But they are not capable of sufficiently rapid organisation (and above all cannot be reversed or undone at a later date), to be the most serviceable instrument for the prevention of the trade cycle.” — Keynes, Collected Works, vol. XXVII, p.122 […]

I also have to step to the defense of Mario here. He seems to be making a point of the uncertainty of the situation when so many are pointing to Keynes’ work as the end-all solution.

Laura, you quote:
“If a large fluctuation is allowed to occur, it will be difficult to find adequate offsetting measures of sufficiently quick action. This can only be done through flexible methods by means of trial and error on the basis of experience which has still to be gained.”

Is this not the situation in which we find ourselves? Keynes, then, was admitting that experience still needed to be gained. Economists now who are skeptical of the stimulus plan are not, from what I’ve read, unilaterally opposed to a stimulus package. I think most of the opposition is an overreaction from invariably louder folks like Krugman who are (zealously?) rooting on public works.

I think both right- and left-leaning economists would like to see a stimulus solution work. Maybe the academic in them is afraid they’ll never be able to separate the cause and effect…

I see no evidence that Keynes was against fiscal stimuli in this statement of his. The statement is critical of bureaucratic control perhaps rather than fiscal stimulus. I will admit scepticism of the current stimulus’s effectiveness as have many others in the pro-stimulus camp but Keynes certainly wasn’t anti-fiscal stimulus.

In contrast to Keynes modern critics, we’ve already seen the failure of Tax cuts…and Clinton’s tax hikes were much more effective than Bush’s tax cuts obviously. So Obama’s kissing around with Republican orthodoxy is a still born idea that’ll waste money. Likewise we can say that bureaucratic slowing down of ‘public works’ is another concern. I think Keynes was in favor in more immediate fiscal stimuli…Employment immediately for CCC types of programs, WPA works etc w/o ‘trickle down’ slowness for construction projects that’ll require too few workers and much expense for ‘expert’s’ already employed.

Even ‘welfare’ is a better ‘stimulus’ than slowly evolving public works programs. I suspect Keynes was for a quicker outlay of expenditures for govt. demand growth that’d spur more confidence in private enterprise’s piggybacking on govt. sponsored investments.

E.G. govt. supported IBM et al in the computer revolution (private capital came later). Another example is the Grandaddy of all stimulus’s: the Erie Canal that funded numerous small contractors to build an extremely profitable and successful venture where private enterprise lacked the imagination or capital to do a large venture. Compared to George Washington’s failed ventures in similar canal building due to only raising private capital. (Erie Canal led to NY being truly the “Empire State” in the early 1800s and kept many people employed who’d perhaps would have perished in famine (many immigrants worked on it). It was an excellent mixture of private and public work.

Private capital by itself hasn’t much to show for itself….what? Trump Towers? Casinos? that’s about the height of Reagan’s revolution compared to the earlier computer innovations (first funded by Defense dept in the 40s and 50s), Highways that led to ‘suburbia”, Technology based on Nasa. This was funded by higher tax rates for the speculator class helped make the USA number one…while now we’re slipping under free market orthodoxy and private debt (growth of which is 22 times faster than govt debt in the last 2 decades_). Now China’s becoming the innovator with it’s already enacted massive stimulus package with Chinese stocks already going up while our’s stagnate. .

“Krugman challenged Keynes’s critics to read some Keynes, and that’s what seems to be happening.”

MIS-reading is more like it, in this case. Keynes says you probably can’t *prevent* the trade cycle with organized public spending. But we’re not in the situation of *preventing* a recession, but rather of addressing one that’s already a year old. What we now need to we *prevent* is things getting worse, and/or leveling off at some stagnant equilibrium.

How does Keynes stating this pretty obvious fact about public works make him more “mature” than he’d been earlier?

The evidence is on the side of Keynes being quite aware that public works operated on unemployment only with a delay, even before the Great Depression. He was intimately involved with the economic platform of the British Liberal Party in the late 1920s; in 1929 they proposed that an extensive 2-year program of public works “would begin to absorb labour within three months of (their) adoption . . . and would before the end of twelve months reduce the numbers of unemployed workers to normal proportions.” (quoted on p.324 of W.R. Garsides’ *British Unemployment 1919-1939: A Study in Public Policy). In later policy debates, Keynes’ proposals for public works spending met the same objection, over and over: that he was assuming an instantaneous effect on employment. If anything, however, his critics on those grounds were suffering from the assumption that the whole mess would clear up on its own in due time anyway, so why bother with measures that might not take full effect for a year or more? — a mentality that persisted into 1933, well *after* a spending program of 4-6% of GDP might have restored employment.

If there’s a “mature Keynes” talking in the quoted letter above, it’s perhaps the Keynes who had learned from experience how it’s politically almost impossible to convince legislators of the need for dramatic movement at the most auspicious time for heading off disaster. After 1943, Keynes became increasingly preoccupied with how government direction of, or influence upon, overall investment might be used to prevent circumstances requiring dramatic action (such as crash programs of “organized public works”). It’s not clear that he entirely abandoned public works as a means of managing the economy to avoid trouble: in reply to James Meade’s comments on his “The Long-Term Problem of Full Employment”, he wrote: “It is quite true that a fluctuating volume of public works is a clumsy form of cure and not likely to be completely successful. On the other hand, if the bulk of investment is under public or semi-public control, and we go for a stable long-term program, serious fluctuations are enormously less likely to occur.” (Quoted on p.214 of Don Patinkin’s *Anticipations of the General Theory*).

“Well the “so what” is then it’s no longer an “emergency stimulus bill”, it may have its own merits, but if it’s long term then it’s for long term, not short term.”

Your idea of “emergency” might not be mine. After all, MY idea of “long-term” is five years, not two.

If we have double-digit unemployment a year from now, I’m fine with calling that a continuing emergency. I’m also up for calling next year “the medium term” — who says all emergencies are short? If unemployment is only 7% next year, we’ll still need some source of spending to get employment back to normal. The bills proposed so far include a variety of measures from tax cuts to “use it or lose it” aid to states, to projects that might not get properly started for a year. We’ll probably need ALL of those, and maybe more.

If you don’t put some longER-term spending into the current bill, the same (or similar) measures probably WILL be emergency spending later, because you didn’t get it right the first time.

Remember, when a recession is over, that’s just means the economy’s no longer shrinking. What if, at that point, you’re still left “pushing on a string”, at high levels of unemployment? The end of the recession is not, in itself, the end of the need for some source of stimulus.

One thing really bothers me here: Rizzo seems to be bashing a strawman. Maybe I just have unusually good taste in econ blogs and econ journalism, but I just can’t remember anybody, anywhere, over the last several months of reading economists citing Keynes approvingly on the subject of stimulus spending who didn’t also point out that organized public works spending works only with a delay, because of the obvious need to, well, organize those public works. It’s like Rizzo’s only reading anti-public works economists who are claiming that pro-public works economists ignore delays, and not reading what those pro-public works economists are actually writing.

Please, any of you, if you can: identify one of these supposed babes in the woods. Tell me who Rizzo’s “those” are.

It is not out of some Fundamentalist Keynesianism that I inquire after precise context, but rather simple common sense: people gear their explanations and arguments to the audience addressed, if they want impact. Here, I just see Keynes explaining the obvious: if you want to “fine-tune” the economy with public spending, you need to the kind of spending that lends itself to control knobs, and elaborate public works do not fit the bill: that kind of spending is more of a step function, and although tearing out a highway or bridge only to put it back in again might be effective stimulus (along the lines of his famous suggestion about burying banknotes in disused mines and leaving it to the private sector to dig them out, really a wry comment on the gold standard more than anything), it’s clearly politically problematic.

In any case, this observation of his does NOT preclude (as he himself points out) the value of organized public works to remedy chronic and persistent demand deficiencies like the Great Depression, or a serious and persistent recession. To title this blog entry “Keynes as public works skeptic” is decidedly disingenuous. Had it been “Keynes on the limits of public works spending” it would, despite an obvious slant, have raised no particular hackles. To me, it’s pretty clear that the whole point of this blog post was simply to get people buzzing that “Keynes was actually against public works spending.” In that, it seems to be succeeding. Should anybody be surprised? Stupider memes have propagated wildly, after all.

But I want to put it differently: Politicians cannot go out and argue that what they do is right in the Keynesian way to deal with business cycles if it is not! Keynes sure was aware of the fact, that spendings will not help getting rid off business cycles. He wanted to smooth the cycle. Therefore Keynes believed it was the right way to SAVE when the economy is going well and spend these savings when it is going into a recession. These ideas are questioned by free market economists, as government spendings are argued to lead to a wrong allocation of resourses. But even if u believe the bureaucrats in Washington know better what Aunt Claire in Alabama wants for breakfast than herself, spending money alone, is not Keynesianism.

What politicans have been doing over years was the Keynesian short-term cure for the recession. But were are the savings to do so? Where has been the Keynesianism during the upturn? I am not sure whether Keynes would be happy to know what is done in his name.

Read this today in the Milwauke Journal Sentinel online, providing evidence to back up comments above that much of the spending on infrastructure is stupid, wasteful, and unproductive and :

“Milwaukee Public Schools would reap $88.6 million over two years for new construction under the economic stimulus package just passed by the U.S. House of Representatives – even though the district has 15 vacant school buildings.”

Its clear from reading some of the nasty responses to this perfectly reasonable post that some people have what amounts to a personal relationship with Keynes (and his modern deciples like Paul Krugman).

A relationship so sensitive as to provoke almost hysterical outpourings and much sarcasm when, what they interpret as criticism of Keynes or his supporters, is encountered.

This occured to the author of an article in The Age (Melbourne, Australia), who unlike Mario, were indeed being critical of Keynes –

“These claims drew a blusterous response from Keynes adherents around the world. Many seemed to take the Keynes observations as a personal insult. They love him almost as much as his biographer, whose own life reflects a form of hero worship, living vicariously through Keynes, in his old house no less.”

Both articles contain some fascinating, and revealing comments by Keynes and his followers. The second is a classic piece describing the work of economist Andrew Broughton, who states that Keynes had no real theory of business cycles at all, nor of asset booms and credit crunches. Nor can these be analyzed within the Keynesian framework.

A businessman that doesn’t know the difference between Gross and NET is a pretty dumb businessman. Maybe the economists are pretty dumb or maybe they just want us to be.

John Kenneth Galbraith was one of the early Keynesians but he wrote about the planned obsolescence of automobiles in 1959, 13 years after Keynes’ death and 10 years before the Moon landing. What do economists say about it today? How old was Obama in 1959?

There have been 200,000,000+ cars in the United States since 1995, more cars than there were Americans in the 30s. But how much do Americans lose on the depreciation of automobiles every year? It won’t show up in NDP because economists only care about the depreciation of CAPITAL GOODS. But they don’t point that out to us even in their economics books.

“Its clear from reading some of the nasty responses to this perfectly reasonable post that some people have what amounts to a personal relationship with Keynes (and his modern deciples like Paul Krugman).

A relationship so sensitive as to provoke almost hysterical outpourings and much sarcasm when, what they interpret as criticism of Keynes or his supporters, is encountered.”

A strange, though true observation that strikes me as odd considering that the point being made is standard counterpoint material in undergraduate econ, at least it was at U Oregon which is a New Keynesian redoubt of sorts. In monetary policy courses taught by Mark Thoma, the slow nature of the political process is offered as one of the mitigating factors in fiscal stimulus effectiveness.

“[I am] in favour of an admixture of public works, but my feeling is that unless you socialise the country to a degree that is unlikely, you will get to the end of the public works program, if not in one year, in two years, and therefore if you are not prepared to reduce the rate of interest and bring back private enterprise, when you get to the end of the public works program you have shot your bolt, and you are no better off.”